23 Jan 2009
Please do not repeat the same mistakes that people in the housing market have made...
In looking at the current financial crisis, one can't help but draw similarities between the housing market and the tech sector. The housing crisis occurred, in a simplified view, because financial institutions piled layers upon layers of complex contractual obligations on top of a faulty asset: loans to people who couldn't pay them. While there were many players in the game, each relied on the middleman before them to guarantee that the loans wouldn't go bad. They diced, repackaged, and resold these loan contracts to unsuspecting buyers and to themselves while under the illusion that these assets were safe. In doing so, everyone believed they had much more money than they actually possessed. So when one weak link broke, their ever entangling and fragile web of dependencies came tumbling down.
Software in an unimaginative leap, is not so far from a contractual obligation, and data is the Internet's currency. With programming APIs to pull data from one service to another abound, developers willingly building mashable apps on cloud servers such as Google AppEngine and AWS, and with more people depending on these services than ever, its hard not to see that we are heading down the same path that finance took, a path toward the information infrastructure crash.
Although only recently have the cracks begun to show with the announcement of the end of Google Notebooks and Jaiku, Pownce closing its doors, and Twitter reducing its availability to API developers, these seemingly innocuous events send a clear signal that these virtual streams of data and services can not be relied upon.
Similar to the Subprime crisis, when these services close, they bring down with them a slew of other companies that relied upon them. When they go down, they carry with them the thousand of man hours of free labor that users put into updating profiles, posting pictures, and comments on each other's pages. The web can only get so social, and maybe now is the time to consider a small dose of self-reliance.
If not, people will be asking one day how we ever led ourselves to believe that companies like Google or Amazon were too big to fail.
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